Use the figure for the question(s)below.
-You have shorted a call option on WSJ stock with an exercise price of $50. The option will expire in exactly six months. If the share is trading at $60 in three months, what will you owe for each share in the contract?
A)$60
B)$10
C)$0
D)$50

Question

Use the figure for the question(s)below. 
-You have shorted a call option on WSJ stock with an exercise price of $50. The option will expire in exactly six months. If the share is trading at $60 in three months, what will you owe for each share in the contract?
A)$60 
B)$10 
C)$0 
D)$50

Quizplus · Accepted Answer

Since you have shorted a call option, if the stock price goes above the exercise price, you will have to buy shares at the market price and sell them at the exercise price, resulting in a loss. In this scenario, the stock price is $60, which is $10 above the exercise price of $50, and there are three months until expiration. This means there is still time for the stock price to increase further and your potential loss to increase as well. Therefore, you will owe $10 for each share in the contract.

Use the Figure for the Question(s)below